March 16, 1998
Is the Internet ready for fee-based services?
By Bob O'Donnell
Many people still hold out hope that the Internet will someday prove to be a thriving
business environment where fortunes can be made and customers can be satisfied. But, as
far as I can see, we're not there yet, and probably won't be for some time to come,
particularly when it comes to services.
Certainly, the Internet has its share of success stories - although the picture may not
be quite as rosy as we have been led to believe. Amazon.com,
for example, was widely touted as a great example of a successful online business, but
when it filed for a public offering of its stock, many people were shocked to find out
that the company was still losing money - and a fair amount of it at that.
Some sites - notably the big search engines - are receiving a great deal of income from
advertising revenues, although again, the vast majority of advertising-based sites have
yet to turn a profit. Some Web stores are doing well - the Dell
Store, for example, apparently pulls in several million dollars of revenue a day. And
I've read reports that a few clothing manufacturers have had some success online.
But what ties all these various "success" stories together is that they're
based around tangible products. (Even advertising, in a sense, is a tangible product in
that you can see it and use it.) Frankly, I don't think that it's surprising that people
would buy things over the Web, but it's also not that revolutionary. In these cases the
Web is simply acting as a replacement for a mail-order catalog.
Information-based products, such as subscription magazines, on the other hand, have not
shared any of the successes that tangible products have had. In fact, they have been a
near total bust, with the lone exception of the Wall Street
Journal Interactive. Nobody seems willing to pay for content - especially when so much
other good stuff is available for free elsewhere on the Internet.
The word "free," in fact, has become an ingrained part of the Internet
culture. This unwillingness to pay for any Web-based information product could prove even
more devastating for Web-based services, which, by their very nature, are more intangible.
To me, this is a bigger long-term problem for successful commerce on the Internet, because
the really interesting possibilities, at least intellectually, for Web-based businesses
are in unique services that might be made available through the Net.
After all, if we're really moving from a traditional manufacturing-based economy toward
an information-based economy, shouldn't there be more information-based business? And
logically, shouldn't those information-based services be delivered through the
international information infrastructure now available through the Internet?
Unfortunately, the Web has proven to be a resounding failure in this regard - at least,
so far. Free services, such as search engines, and other resource archives are certainly
successful, but do you think if Yahoo starting charging per search that the company would
be able to survive very long? Heck, even some free services, such as the push mechanisms
that were so widely touted just a year ago, are having a hard time attracting willing
customers.
Eventually, I think fee-based services on the Web will prove to be a viable, profitable
business. But I wouldn't be surprised if it takes a decade for them to make an impact. And
in today's environment of venture capital-based quick-return-on-investment businesses,
that might as well be eternity.
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Copyright 1998, by InfoWorld Publishing Corp., a
subsidiary of IDG Communications, Inc. Reprinted from InfoWorld,
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